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  1. #1

    Lifetime Allowance

    With 4 years to go before I retire, and assuming my DC pot continues to grow as it has over the last 10 years, I will be within spitting distance of the current LTA. My intention is to go into drawdown and take (say) 4% annually, with the first 25% of each payment free of tax.

    Assuming I live for a few more years there is a danger that my drawdown fund could exceed the 1 figure. Will this result in being hit by the punitive tax charge? If so, I may rein back in my pension contributions now, and invest elsewhere instead.

    Grateful for thoughts.

  2. #2
    The LTA is tested at the time the pension is put into drawdown. It will then be tested again at the then prevailing LTA when you reach 75. If you think it likely to breech the age 75 LTA, you can always increase the amount you draw down.

    I believe the pension industry thing the age 75 LTA serves no real purpose in the vast majority of cases, so hopefully their lobbying will eventually lead to its removal - ideally before I reach 75 and I am ahead of you!

  3. #3
    The LTA is tested at the time the pension is put into drawdown. It will then be tested again at the then prevailing LTA when you reach 75. If you think it likely to breech the age 75 LTA, you can always increase the amount you draw down.

    I believe the pension industry thing the age 75 LTA serves no real purpose in the vast majority of cases, so hopefully their lobbying will eventually lead to its removal - ideally before I reach 75 and I am ahead of you!

  4. #4
    LTA rises by 3% to 1,030,000 in April.

    LTA should rise with inflation, so you will be doing well to grow your fund by more than 4% + inflation over the long term I think.

  5. #5
    I can not comment on your specific circumstances for all sorts of reasons but comments:

    1. The chancellor increased the lifetime allowance in the 2017 budget by 3% to 1,030,000 - as we all know governments of all persuasions are very keen to keep changing the rules - but this maybe the first of a trend. Think of it as a bribe to the rich middle classes to vote Tory.

    2. You may want to contribute more than the LTA considering that there maybe a correction / crash during your retirement which at the moment I am not sure where would be safe from it - the extra you might want to hold as cash or if you are in to that sort of thing - gold.

    3. I personally have a strategy which contributes 1/3 of my total investments to my ISA and 2/3rd to my SIPP. I use the ISA for income generation and my SIPP on an income and growth strategy. As such - both generate a similar amount of income due to the different strategies in play.


 

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